VANCOUVER, BC–(Marketwired – November 03, 2016) – Klondex Mines Ltd. (TSX: KDX) (NYSE MKT: KLDX) (“Klondex”, the “Company”, “we”, “our”, or “us”) is pleased to announce its operational and financial results for the third quarter of 2016 as well as recent developments. This press release should be read in conjunction with our third quarter 2016 interim financial statements and related management’s discussion & analysis (“MD&A”), which are available on our website (www.klondexmines.com), on SEDAR (www.sedar.com), and on EDGAR (www.sec.gov). All dollar amounts included in this press release are expressed in thousands of United States dollars, unless otherwise noted, and are based on our financial statements and MD&A, which were prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. References to “Notes” refers to the notes contained in the third quarter 2016 interim financial statements. “Nevada Operations” collectively refers to our Fire Creek and Midas mines.
Third Quarter 2016 Highlights
- Health, Safety, and Environmental – No lost-time injuries or environmental citations at Fire Creek, Midas or True North.
- True North – Positive production decision and first gold sold, now have three producing mines.
- Cash Flows and Liquidity – Strengthened financial position and liquidity. Following a CDN$129.5 million equity offering, cash balance of $131.1 million, working capital of $119.9 million (ratio of 4.1:1), and total liquidity of $144.9 million when including the Revolver availability. On October 3, 2016, remitted $80.0 million payment to complete Hollister Acquisition.
- Ounces Sold and Financial Results – Sold 41,553 gold equivalent ounces (“GEOs”), consisting of 36,648 gold ounces and 362,500 silver ounces. Revenue of $53.0 million from average selling prices per gold and silver ounce of $1,276 and $17.26, respectively. Net income of $7.2 million (or $0.05 per share – basic).
- Nevada Operations and Performance Measures – Produced 35,324 GEOs and continued trend of increasing GEO grades milled at Nevada Operations. Nevada Operations operating metrics were: 761 ore tons milled per day at an average GEO mill head grade of 0.55 oz/ton. Cost metrics are as follows:
| Production cash costs per gold equivalent ounce sold | All-in sustaining costs per gold ounce sold | All-in costs per gold ounce sold (excluding True North) | |||||||
| Non-IFRS Measure – Nevada Operations(1) | $ | 671 | $ | 1,155 | $ | 1,206 | |||
| (1) See Non-IFRS Performance Measures in this Press Release. | |||||||||
- Mineral Reserves and Resources – Updated Mineral Reserve and Mineral Resource estimates for Fire Creek, Midas, and True North.
- Capital Expenditures – Spent $8.9 million at Fire Creek, $8.0 million at Midas, $3.8 million at True North, and $0.1 million at corporate for total capital spending of $20.8 million.
Recent Developments
- Hollister Acquisition and Private Placement – On October 3, 2016, completed the acquisition of the Hollister and Aurora projects, located in Nevada, USA. Synergies with our Nevada Operations and significant future operational and exploration potential.
- True North Technical Report – On October 27, 2016, we filed a Technical Report for True North and reported a Mineral Reserve in the tailings of ~32,400 Au oz consisting of 1,170k tons at an average grade of 0.028 Au opt. This is in addition to the Mineral Reserve and Mineral Resource of the True North gold mine announced on September 12, 2016.
- Secured Revolving Facility – On October 27, 2016, we amended our Revolver to increase its capacity by $10.0 million to $35.0 million, further strengthening our financial position and liquidity.
Mr. Paul Huet, President and CEO commented, “We continue to deliver on our commitments as our third quarter operating and financial results were in line with our plans. Due to the planned development activities conducted throughout the year, we are well positioned to achieve our full year production and cost guidance.” Mr. Huet continued, “We also achieved a milestone in the third quarter by placing our third mine into production. True North has become an important asset in our portfolio and we are excited about its future contributions to our profitability.”
2016 Full Year Outlook
Nevada Operations
We maintain our targeted total annual production costs and GEO production guidance, which is expected to be weighted approximately 45%-50% in the first-half of 2016 and 50%-55% in the second-half of 2016. While we maintain our annual total Nevada Operations guidance, our production cash cost per GEO range was decreased by $50 at Fire Creek and was increased by $50 at Midas. Our 2016 GEO production and grades are expected to progressively increase from the first half of the year to the second half of the year following the completion of planned first-half development and silling activities. GEO grades milled at our Nevada Operations were 0.44 oz/ton, 0.52 oz/ton, and 0.55 oz/ton during the first, second, and third quarters of 2016, respectively.
The following table outlines our annual guidance compared to actual results and presents all-in costs per gold ounce sold exclusive of True North, which was acquired during the first quarter of 2016 (after the release of our full-year guidance):
| Fire Creek | Midas | Total | Actual | ||||||||||||||||||
| 2016 Guidance (Nevada Operations) | Low | High | Low | High | Low | High | Nine months ended September 30, 2016 | ||||||||||||||
| Gold equivalent ounces produced(1) | 97,000 | 100,000 | 48,000 | 50,000 | 145,000 | 150,000 | 106,901 | ||||||||||||||
| Production cash costs per GEO sold(1)(2) | $ | 400 | $ | 450 | $ | 900 | $ | 950 | $ | 600 | $ | 650 | $ | 649 | |||||||
| All-in sustaining costs per gold ounce sold(2) | $ | 850 | $ | 900 | $ | 1,067 | |||||||||||||||
| All-in costs per gold ounce sold, excluding True North(2) | $ | 1,025 | $ | 1,075 | $ | 1,163 | |||||||||||||||
| Capital expenditures on mineral properties, plant and equipment, excluding True North | $ | 34,700 | $ | 36,700 | $ | 20,300 | $ | 23,300 | $ | 55,000 | $ | 60,000 | $ | 45,514 | |||||||
| (1) Gold equivalent measures are the gold measure plus the silver measure divided by a GEO ratio. GEO ratios are computed by dividing the projected average realized gold price per ounce by the projected average realized silver price per ounce expected to be received by us in 2016. | |||||||||||||||||||||
| (2) See Non-IFRS Performance Measures section in this Press Release. | |||||||||||||||||||||
True North
We expect to produce gold ounces during the second half of 2016 from a combination of processing gold in tailings and mining. The following table outlines our annual guidance and is compared to actual results:
| Total | Actual | ||||||||
| 2016 Guidance (True North) | Low | High | Nine months ended September 30, 2016 | ||||||
| Gold ounces produced | 8,000 | 12,000 | 1,752 | ||||||
| Capital expenditures on mineral properties, plant and equipment | $ | 14,000 | $ | 16,000 | $ | 11,708 | |||
Hollister Project
The following table outlines our fourth quarter projections for Hollister capital spending:
| Total | Actual | ||||||||
| 2016 Guidance (Hollister Project) | Low | High | Nine months ended September 30, 2016 | ||||||
| Capital expenditures on mineral properties, plant and equipment | $ | 7,500 | $ | 9,500 | $ | – | |||
Consolidated Financial Results of Operations
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Revenues | $ | 53,005 | $ | 38,436 | $ | 136,484 | $ | 118,002 | ||||||||
| Cost of sales | ||||||||||||||||
| Production costs | 27,828 | 21,029 | 71,750 | 63,366 | ||||||||||||
| Depreciation and depletion | 7,127 | 7,628 | 19,885 | 22,442 | ||||||||||||
| Gross profit | 18,050 | 9,779 | 44,849 | 32,194 | ||||||||||||
| General and administrative expenses | 4,840 | 3,454 | 11,429 | 9,252 | ||||||||||||
| Loss on equipment disposal | 109 | – | 109 | 351 | ||||||||||||
| Income from operations | 13,101 | 6,325 | 33,311 | 22,591 | ||||||||||||
| (Loss) gain on gold supply agreement derivative, net | (113 | ) | (66 | ) | (1,948 | ) | 229 | |||||||||
| Finance charges, net | (1,305 | ) | (2,120 | ) | (3,886 | ) | (6,405 | ) | ||||||||
| Foreign currency gain (loss), net | 370 | 5,945 | (1,837 | ) | 12,207 | |||||||||||
| Business acquisition costs | (819 | ) | – | (1,846 | ) | – | ||||||||||
| Provision for legal settlement | – | – | (2,250 | ) | – | |||||||||||
| Other, net | (813 | ) | – | (694 | ) | – | ||||||||||
| Income before tax | 10,421 | 7,952 | 20,850 | 26,490 | ||||||||||||
| Income tax expense | 3,207 | 3,836 | 7,594 | 10,347 | ||||||||||||
| Net income | $ | 7,214 | $ | 4,116 | $ | 13,256 | $ | 16,143 | ||||||||
| Net income per share | $ | 0.05 | $ | 0.03 | $ | 0.09 | $ | 0.12 | ||||||||
When compared to the prior year quarter, third quarter 2016 Revenues were higher from selling an additional 8,714 gold ounces at a $140 higher average realized price, partially offset by a decrease in silver sales due to low silver grades. Production costs and Depreciation and depletion increased from the prior period due primarily to an increase in ounces sold. General and administrative expenses increased in 2016 due to increased staff levels at the corporate office, severance payments, and costs associated with our deferred share unit plan. Finance charges were primarily related to the gold purchase agreement, finance leases, and the promissory note pursuant to the True North acquisition. Business acquisition costs related to the True North and Hollister/Aurora acquisitions.
Liquidity and Capital Resources
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||||||||||
| 2016 | 2015 | Change | 2016 | 2015 | Change | |||||||||||||||||||
| Net cash provided by operating activities | $ | 16,576 | $ | 13,399 | $ | 3,177 | $ | 44,539 | $ | 36,662 | $ | 7,877 | ||||||||||||
| Net cash used in investing activities | (20,760 | ) | (9,728 | ) | (11,032 | ) | (75,056 | ) | (23,809 | ) | (51,247 | ) | ||||||||||||
| Net cash provided by financing activities | 98,410 | 2,665 | 95,745 | 101,719 | 3,298 | 98,421 | ||||||||||||||||||
| Effect of foreign exchange on cash balances | 38 | (543 | ) | 581 | 842 | (1,348 | ) | 2,190 | ||||||||||||||||
| Net increase in cash | 94,264 | 5,793 | 88,471 | 72,044 | 14,803 | 57,241 | ||||||||||||||||||
| Cash, beginning of period | 36,877 | 54,498 | 59,097 | 45,488 | ||||||||||||||||||||
| Cash, end of period | $ | 131,141 | $ | 60,291 | $ | 131,141 | $ | 60,291 | ||||||||||||||||
We generated $16.6 million of net operating cash flows and were provided $98.4 million from financing cash flows due to the CDN$129.5 million equity offering and the exercise of share options and warrants; cash used in investing activities totaled $20.8 million. We maintained our strong financial position and as of September 30, 2016, had total liquidity of $144.9 million, consisting of $119.9 million in working capital and $25.0 million of borrowing availability under our Revolver. On October 3, 2016, we remitted $80.0 million cash to complete the Hollister Acquisition and on October 27, 2016, we increased our Revolver borrowing capacity by $10.0 million to $35.0 million.
Third Quarter and Year To Date 2016 Summary Operational Results
| Three months ended September 30, |
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| 2016 | 2015 | |||||||||||||||||||||||||||
| Mine operations | Fire Creek | Midas | Nevada Total | True North | Total | Nevada Total(1) | Change | |||||||||||||||||||||
| Ore tons milled | 26,122 | 43,934 | 70,056 | 31,748 | 101,804 | 70,997 | 30,807 | |||||||||||||||||||||
| Average gold equivalent mill head grade (oz/ton)(2) | 0.98 | 0.28 | 0.55 | 0.06 | 0.48 | |||||||||||||||||||||||
| Average gold mill head grade (oz/ton) | 0.97 | 0.18 | 0.48 | 0.06 | 0.39 | |||||||||||||||||||||||
| Average silver mill head grade (oz/ton) | 0.66 | 7.59 | 5.00 | – | 6.65 | |||||||||||||||||||||||
| Average gold recovery rate (%) | 93.4 | % | 93.4 | % | 93.3 | % | 88.7 | % | 94.1 | % | ||||||||||||||||||
| Average silver recovery rate (%) | 87.2 | % | 87.2 | % | 87.3 | % | – | % | 94.0 | % | ||||||||||||||||||
| Gold equivalent produced (oz)(2) | 23,858 | 11,445 | 35,324 | 1,752 | 37,070 | 32,076 | 4,994 | |||||||||||||||||||||
| Gold produced (oz) | 23,654 | 7,523 | 31,177 | 1,752 | 32,929 | 26,300 | 6,629 | |||||||||||||||||||||
| Silver produced (oz) | 15,023 | 291,031 | 306,054 | – | 306,054 | 443,576 | (137,522 | ) | ||||||||||||||||||||
| Gold equivalent sold (oz)(2)(3)(4) | 27,500 | 13,036 | 40,560 | 1,000 | 41,553 | 33,853 | 7,700 | |||||||||||||||||||||
| Gold sold (oz)(3) | 27,254 | 8,394 | 35,648 | 1,000 | 36,648 | 27,934 | 8,714 | |||||||||||||||||||||
| Silver sold (oz) | 18,100 | 344,400 | 362,500 | – | 362,500 | 454,611 | (92,111 | ) | ||||||||||||||||||||
| Revenues and realized prices | ||||||||||||||||||||||||||||
| Gold revenue (000s) | $ | 34,653 | $ | 10,750 | $ | 45,403 | $ | 1,344 | $ | 46,747 | $ | 31,715 | $ | 15,032 | ||||||||||||||
| Silver revenue (000s) | 312 | 5,946 | 6,258 | – | 6,258 | 6,721 | $ | (463 | ) | |||||||||||||||||||
| Total revenues (000s) | $ | 34,965 | $ | 16,696 | $ | 51,661 | 1,344 | 53,005 | $ | 38,436 | $ | 14,569 | ||||||||||||||||
| Average realized gold price ($/oz) | $ | 1,271 | $ | 1,281 | $ | 1,274 | $ | 1,344 | $ | 1,276 | $ | 1,135 | $ | 141 | ||||||||||||||
| Average realized silver price ($/oz) | $ | 17.24 | $ | 17.26 | $ | 17.26 | $ | – | $ | 17.26 | $ | 14.78 | $ | 2.48 | ||||||||||||||
| Non-IFRS Measures | ||||||||||||||||||||||||||||
| Production cash costs per GEO sold(4) | $ | 499 | $ | 1,035 | $ | 671 | $ | 615 | $ | 670 | $ | 621 | $ | 49 | ||||||||||||||
| All-in sustaining costs per gold ounce sold(4) | $ | 1,155 | n/a | $ | 1,140 | $ | 858 | $ | 282 | |||||||||||||||||||
| All-in costs per gold ounce sold (Nevada Total)(4) | $ | 1,206 | $ | 1,096 | $ | 110 | ||||||||||||||||||||||
| All-in costs per gold ounce sold (including True North)(4) | $ | 1,275 | n/a | n/a | ||||||||||||||||||||||||
| (1) During the 2015, production was only from Nevada Operations. | ||||||||||||||||||||||||||||
| (2) Gold equivalent measures are the gold measure plus the silver measure divided by a GEO ratio. GEO ratios are computed by dividing the average realized gold price per ounce by the average realized silver price per ounce received by us in the respective period and match the ratios used to determine the production cash costs per GEO sold. Refer to the Non-IFRS Performance Measures section of this Press Release for additional detail. | ||||||||||||||||||||||||||||
| (3) Includes ounces sold (if any) under the Gold Supply Agreement and ounces delivered under the Gold Purchase Agreement; see Notes 8 and 10. | ||||||||||||||||||||||||||||
| (4) This is a non-IFRS measure; refer to the Non-IFRS Performance Measures section of this Press Release for additional detail. | ||||||||||||||||||||||||||||
| Nine months ended September 30, |
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| 2016 | 2015 | |||||||||||||||||||||||||||
| Mine operations | Fire Creek | Midas | Nevada Total | True North | Total | Nevada Total(1) | Change | |||||||||||||||||||||
| Ore tons milled | 92,832 | 137,173 | 230,005 | 31,748 | 261,753 | 191,721 | 70,032 | |||||||||||||||||||||
| Average gold equivalent mill head grade (oz/ton)(2) | 0.86 | 0.26 | 0.50 | 0.06 | 0.54 | |||||||||||||||||||||||
| Average gold mill head grade (oz/ton) | 0.85 | 0.15 | 0.43 | 0.06 | 0.44 | |||||||||||||||||||||||
| Average silver mill head grade (oz/ton) | 0.76 | 8.24 | 5.22 | – | 7.13 | |||||||||||||||||||||||
| Average gold recovery rate (%) | 93.6 | % | 94.1 | % | 93.7 | % | 88.7 | % | 94.2 | % | ||||||||||||||||||
| Average silver recovery rate (%) | 87.4 | % | 87.7 | % | 87.7 | % | – | % | 92.9 | % | ||||||||||||||||||
| Gold equivalent produced (oz)(2) | 74,480 | 32,357 | 106,901 | 1,752 | 108,634 | 97,269 | 11,365 | |||||||||||||||||||||
| Gold produced (oz) | 73,673 | 19,287 | 92,960 | 1,752 | 94,712 | 80,077 | 14,635 | |||||||||||||||||||||
| Silver produced (oz) | 61,864 | 990,672 | 1,052,536 | – | 1,052,536 | 1,270,504 | (217,968 | ) | ||||||||||||||||||||
| Gold equivalent sold (oz)(2)(3)(4) | 72,644 | 36,916 | 109,629 | 1,000 | 110,610 | 99,461 | 11,149 | |||||||||||||||||||||
| Gold sold (oz)(3) | 71,688 | 23,423 | 95,111 | 1,000 | 96,111 | 81,837 | 14,274 | |||||||||||||||||||||
| Silver sold (oz) | 73,351 | 1,022,739 | 1,096,090 | – | 1,096,090 | 1,302,419 | (206,329 | ) | ||||||||||||||||||||
| Revenues and realized prices | ||||||||||||||||||||||||||||
| Gold revenue (000s) | $ | 88,235 | $ | 29,008 | $ | 117,243 | $ | 1,344 | $ | 118,587 | $ | 97,098 | $ | 21,489 | ||||||||||||||
| Silver revenue (000s) | 1,177 | 16,720 | 17,897 | – | 17,897 | 20,904 | $ | (3,007 | ) | |||||||||||||||||||
| Total revenues (000s) | $ | 89,412 | $ | 45,728 | $ | 135,140 | 1,344 | 136,484 | $ | 118,002 | $ | 18,482 | ||||||||||||||||
| Average realized gold price ($/oz) | $ | 1,231 | $ | 1,238 | $ | 1,233 | $ | 1,344 | $ | 1,234 | $ | 1,186 | $ | 48 | ||||||||||||||
| Average realized silver price ($/oz) | $ | 16.05 | $ | 16.35 | $ | 16.33 | $ | – | $ | 16.33 | $ | 16.05 | $ | 0.28 | ||||||||||||||
| Non-IFRS Measures | ||||||||||||||||||||||||||||
| Production cash costs per GEO sold(4) | $ | 458 | $ | 1,025 | $ | 649 | $ | 615 | $ | 649 | $ | 637 | $ | 12 | ||||||||||||||
| All-in sustaining costs per gold ounce sold(4) | $ | 1,067 | n/a | $ | 1,062 | $ | 750 | $ | 312 | |||||||||||||||||||
| All-in costs per gold ounce sold (Nevada Total)(4) | $ | 1,163 | $ | 1,046 | $ | 117 | ||||||||||||||||||||||
| All-in costs per gold ounce sold (including True North)(4) | $ | 1,272 | n/a | n/a | ||||||||||||||||||||||||
| (1) During the 2015, production was only from Nevada Operations. | ||||||||||||||||||||||||||||
| (2) Gold equivalent measures are the gold measure plus the silver measure divided by a GEO ratio. GEO ratios are computed by dividing the average realized gold price per ounce by the average realized silver price per ounce received by us in the respective period and match the ratios used to determine the production cash costs per GEO sold. Refer to the Non-IFRS Performance Measures section of this Press Release for additional detail. | ||||||||||||||||||||||||||||
| (3) Includes ounces sold (if any) under the Gold Supply Agreement and ounces delivered under the Gold Purchase Agreement; see Notes 8 and 10. | ||||||||||||||||||||||||||||
| (4) This is a non-IFRS measure; refer to the Non-IFRS Performance Measures section of this Press Release for additional detail. | ||||||||||||||||||||||||||||
Our 2016 annual operating plan for our Nevada Operations encompasses higher GEO grades and production during the second half of the year. During the third quarter of 2016, our Nevada mines produced 35,324 GEOs, bringing our year to date consolidated GEO production to 106,901 GEOs, which is approximately 73% of our annual guidance’s midpoint range. At our Nevada Operations, the 70,056 ore tons milled (average of 761 tons per day) represented a decrease of 186 tons per day from the prior quarter as we focused mining efforts on ore development to access additional faces in the fourth quarter. Our fourth quarter plan entails increasing both the GEO grades by mining in higher grade areas and the average daily milling rate at the Midas mill. At True North, we reported our first gold sales from the re-processing of existing tailings and during the fourth quarter will begin running ore through the mill.
Fire Creek and Midas’s third quarter 2016 ounces sold were in-line with management expectations and included the sale of 40,560 GEOs, consisting of 35,648 gold ounces and 362,500 silver ounces. Due to the sale of an additional 7,714 gold ounces at a $139 higher average realized price, gold revenue at our Nevada Operations increased $13.7 million during the third quarter of 2016 compared to the same period of 2015, while silver revenue decreased due to lower grades which were offset by higher realized prices. True North recorded its first revenue from the sale of 1,000 gold ounces at $1,344 per ounce, bringing consolidated sales to 41,553 GEOs totaling $53.0 million in revenue.
We continued to generate significant cash margins on a consolidated basis as our third quarter production cash costs per GEO sold of $670 remained well below current gold price levels.
Webcast and Conference Call
Klondex will report its third quarter 2016 financial results after market close on Thursday, November 3, 2016. A conference call and webcast will be held the following morning on Friday, November 4, 2016 at 10:30 am ET/7:30 am PT. The conference call telephone numbers are listed below:
Canada & USA Toll Free Dial In: 1-800-319-4610
Toronto: +1 1-416-915-3239
International: +1-604-638-5340
Callers should dial in 5 to 10 minutes prior to the scheduled start time and ask to join the Klondex call. The webcast will be available on the Company’s website or by clicking: http://services.choruscall.ca/links/klondex20161104.html.
About Klondex Mines Ltd. (www.klondexmines.com)
Klondex is a well-capitalized, junior-tier gold and silver mining company focused on exploration, development, and production in a safe, environmentally responsible, and cost-effective manner. The Company has 100% interests in three producing mineral properties: the Fire Creek Mine and the Midas Mine and ore milling facility, both of which are located in the state of Nevada, USA, and the True North Gold Mine (formerly the Rice Lake Mine) and mill in Manitoba, Canada. The Company also has 100% interests in two recently acquired projects, the Hollister mine and the Aurora mine and ore milling facility (formerly known as Esmeralda), also located in Nevada, USA.
Cautionary Note Regarding Technical Information and Forward-looking Information
This news release contains certain information that may constitute forward-looking information or forward-looking statements under applicable Canadian and U.S. securities legislation (collectively, “forward looking information”), including but not limited to information about current expectations on the timing and success of exploration and development activities, the timing and success of mining operations, the Company’s ability to produce and sell gold and silver, the Company’s achievement of the full-year projections for ounce production, metal grades and production costs, the Company’s ability to meet annual operations estimates, the ability to maintain average daily milling rates, the Company’s capital addition expenditures, the Company’s intention and ability to monetize mineralized material, the results of economic studies regarding the Company’s mineral projects, the Company’s financial conditions, the successful execution and project development at all of the Company’s mines and projects, and related permitting the completion of the Hollister acquisition, and the completion of the equity private placement. This forward-looking information entails various risks and uncertainties that are based on current expectations, and actual results may differ materially from those contained in such information. These uncertainties and risks include, but are not limited to, the strength of the global economy; the price of gold and silver; operational, funding and liquidity risks; the degree to which mineral resource estimates are reflective of actual mineral resources; the degree to which factors which would make a mineral deposit commercially viable are present; the risks and hazards associated with underground operations; and the ability of Klondex to fund its substantial capital requirements and operations. Risks and uncertainties about the Company’s business are more fully discussed in the Company’s disclosure materials filed with the securities regulatory authorities in Canada and United States available at www.sedar.com and www.sec.gov, respectively. Readers are urged to read these materials. Klondex assumes no obligation to update any forward-looking information or to update the reasons why actual results could differ from such information unless required by law.
Technical Information
Scientific and technical information in this press release has been reviewed and approved by Brian Morris, a “qualified person” within the meaning of NI 43-101.
Non-IFRS Performance Measures
We have included the non-IFRS measures “Production cash costs per gold equivalent ounce sold”, “All‐in sustaining costs per gold ounce sold”, and “All-in costs per gold ounce sold” in this press release (collectively, the “Non-IFRS Measures”). These Non-IFRS Measures are used internally to assess our operating and economic performance and to provide key performance information to management. We believe that these Non-IFRS Measures, in addition to conventional measures prepared in accordance with IFRS, provide investors with an improved ability to evaluate our performance and ability to generate cash flows required to fund our business. These Non-IFRS Measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These Non-IFRS Measures do not have any standardized meaning prescribed under IFRS, and therefore may not be comparable to or consistent with measures used by other issuers or with amounts presented in our financial statements.
Our primary business is gold production and our future development and current operations primarily focus on maximizing returns from such gold production. As a result, our Non-IFRS Measures are calculated and disclosed on a per gold ounce basis.
Production Cash Costs per Gold Equivalent Ounce Sold
Production cash costs per gold equivalent ounce sold presents our cash costs associated with the production of gold equivalent ounces and, as such, non-cash depreciation and depletion charges are excluded. Production cash costs per gold equivalent ounce sold is calculated on a per gold equivalent ounce sold basis, and includes all direct and indirect operating costs related to the physical activities of producing gold, including mining, processing, third-party refining expenses, on-site administrative and support costs, and royalties (State of Nevada net proceeds and other such taxes are excluded). Gold equivalent ounces are computed as the number of silver ounces required to generate the revenue derived from the sale of one gold ounce, using average realized selling prices (table in thousands, except ounces sold and per ounce amounts):
| Three months ended September 30, 2016 |
Three months ended September 30, 2015 |
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| Fire Creek | Midas | Nevada Total | True North | Total | Fire Creek | Midas | Nevada Total(1) | ||||||||||||||||||
| Average realized price per gold ounce sold | $ | 1,271 | $ | 1,281 | $ | 1,274 | $ | 1,344 | $ | 1,276 | $ | 1,130 | $ | 1,158 | $ | 1,135 | |||||||||
| Average realized price per silver ounce sold | $ | 17.24 | $ | 17.26 | $ | 17.26 | $ | – | $ | 17.26 | $ | 15.17 | $ | 14.77 | $ | 14.78 | |||||||||
| Silver ounces equivalent to revenue from one gold ounce | 73.8 | 74.2 | 73.8 | – | 73.9 | 74.5 | 78.4 | 76.8 | |||||||||||||||||
| Silver ounces sold | 18,100 | 344,400 | 362,500 | – | 362,500 | 13,248 | 441,363 | 454,611 | |||||||||||||||||
| GEOs from silver ounces sold | 246 | 4,642 | 4,912 | – | 4,905 | 178 | 5,630 | 5,919 | |||||||||||||||||
| Gold ounces sold(2) | 27,254 | 8,394 | 35,648 | 1,000 | 36,648 | 22,203 | 5,731 | 27,934 | |||||||||||||||||
| Gold equivalent ounces | 27,500 | 13,036 | 40,560 | 1,000 | 41,553 | 22,381 | 11,361 | 33,853 | |||||||||||||||||
| Production costs | $ | 13,716 | $ | 13,497 | $ | 27,213 | $ | 615 | $ | 27,828 | $ | 10,124 | $ | 10,905 | $ | 21,029 | |||||||||
| Production cash costs per GEO sold | $ | 499 | $ | 1,035 | $ | 671 | $ | 615 | $ | 670 | $ | 452 | $ | 960 | $ | 621 | |||||||||
| Nine months ended September 30, 2016 |
Nine months ended September 30, 2015 |
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| Fire Creek | Midas | Nevada Total | True North | Total | Fire Creek | Midas | Nevada Total(1) | ||||||||||||||||||
| Average realized price per gold ounce sold | $ | 1,231 | $ | 1,238 | $ | 1,233 | $ | 1,344 | $ | 1,234 | $ | 1,178 | $ | 1,208 | $ | 1,186 | |||||||||
| Average realized price per silver ounce sold | $ | 16.05 | $ | 16.35 | $ | 16.33 | $ | – | $ | 16.33 | $ | 16.52 | $ | 16.03 | $ | 16.05 | |||||||||
| Silver ounces equivalent to revenue from one gold ounce | 76.7 | 75.8 | 75.5 | – | 75.6 | 71.3 | 75.4 | 73.9 | |||||||||||||||||
| Silver ounces sold | 73,351 | 1,022,739 | 1,096,090 | – | 1,096,090 | 58,218 | 1,244,201 | 1,302,419 | |||||||||||||||||
| GEO from silver ounces sold | 956 | 13,493 | 14,518 | – | 14,499 | 817 | 16,501 | 17,624 | |||||||||||||||||
| Gold ounces sold(2) | 71,688 | 23,423 | 95,111 | 1,000 | 96,111 | 58,743 | 23,094 | 81,837 | |||||||||||||||||
| Gold equivalent ounces | 72,644 | 36,916 | 109,629 | 1,000 | 110,610 | 59,560 | 39,595 | 99,461 | |||||||||||||||||
| Production costs | $ | 33,285 | $ | 37,850 | $ | 71,135 | $ | 615 | $ | 71,750 | $ | 28,316 | $ | 35,050 | $ | 63,366 | |||||||||
| Production cash costs per GEO sold | $ | 458 | $ | 1,025 | $ | 649 | $ | 615 | $ | 649 | $ | 475 | $ | 885 | $ | 637 | |||||||||
| (1) During the 2015, production was only from Nevada Operations. | |||||||||||||||||||||||||
| (2) Includes ounces sold (if any) under the Gold Supply Agreement and ounces delivered under the Gold Purchase Agreement; see Notes 8 and 10. | |||||||||||||||||||||||||
All-in Sustaining Costs per Gold Ounce Sold
All-in sustaining costs per gold ounce sold presents the full cost of gold production from our current operations; therefore, capital amounts related to expansion and growth projects are excluded. Certain other cash expenditures, including State of Nevada net proceeds and other related taxes, federal tax payments, and financing costs are also excluded. Our calculation of all-in sustaining costs per gold ounce sold is consistent with the June 2013 guidance released by the World Gold Council, a non-regulatory, non-profit market development organization for the gold industry.
We calculate our all-in sustaining costs per gold ounce sold on a Nevada basis, as ore from both Fire Creek and Midas is processed at Midas, for True North, and for a consolidated total. All-in sustaining costs per gold ounce sold includes all: (1) direct and indirect operating cash costs related to the physical activities of producing gold, including mining, processing, third-party refining expenses, on-site administrative and support costs, and royalties, (2) general and administrative expenses, (3) decommissioning provision accretion, and (4) sustaining capital expenditures, the total of which is reduced for revenues earned from silver sales (table in thousands, except ounces sold and per ounce amounts):
| Three months ended September 30, |
Nine months ended September 30, |
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| 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||||||
| Nevada Total(1) | True North | Total | Nevada Total(2) | Nevada Total(1) | True North | Total | Nevada Total(2) | ||||||||||||||||||||||||
| Production costs | $ | 27,213 | $ | 615 | $ | 27,828 | $ | 21,029 | $ | 71,135 | $ | 615 | $ | 71,750 | $ | 63,366 | |||||||||||||||
| General and administrative expenses | 4,840 | – | 4,840 | 3,454 | 11,429 | – | 11,429 | 9,252 | |||||||||||||||||||||||
| Decommissioning provision accretion | 137 | – | 137 | 107 | 412 | – | 412 | 299 | |||||||||||||||||||||||
| Sustaining capital expenditures | 15,230 | – | 15,230 | 6,112 | 36,390 | – | 36,390 | 9,396 | |||||||||||||||||||||||
| Less: Silver revenue | (6,258 | ) | – | (6,258 | ) | (6,721 | ) | (17,897 | ) | – | (17,897 | ) | (20,904 | ) | |||||||||||||||||
| All-in sustaining costs | 41,162 | 615 | 41,777 | 23,981 | 101,469 | 615 | 102,084 | 61,409 | |||||||||||||||||||||||
| Gold ounces sold(2) | 35,648 | 1,000 | 36,648 | 27,934 | 95,111 | 1,000 | 96,111 | 81,837 | |||||||||||||||||||||||
| All-in sustaining costs per gold ounce sold | $ | 1,155 | $ | 615 | $ | 1,140 | $ | 858 | $ | 1,067 | $ | 615 | $ | 1,062 | $ | 750 | |||||||||||||||
| (1) Nevada Total includes Corporate sustaining capital expenditures and all general and administrative costs. | |||||||||||||||||||||||||||||||
| (2) During the 2015, production was only from Nevada Operations. | |||||||||||||||||||||||||||||||
| (3) Includes ounces sold (if any) under the Gold Supply Agreement and ounces delivered under the Gold Purchase Agreement; see Notes 8 and 10. | |||||||||||||||||||||||||||||||
We define sustaining capital expenditures as those costs which are required to sustain current gold ounce production levels. As such, non-sustaining (growth) capital expenditures include amounts for exploration, development, and permitting activities related to long-term growth and expansion efforts outside of the existing mineral resource boundary. For a reconciliation of our sustaining and non-sustaining (growth) capital expenditures see the Investing Cash Flows part of the Financial Position, Liquidity, and Capital Resources section of the MD&A.
All-in Costs per Gold Ounce Sold
All-in costs per gold ounce sold includes additional costs which reflect the varying costs of producing gold over the life-cycle of a mine or project. We calculate our all-in costs per gold ounce sold by beginning with all-in sustaining costs and adding non-sustaining (growth) capital expenditures and other costs not related to current operations (table in thousands, except ounces sold and per ounce amounts):
| Three months ended September 30, |
Nine months ended September 30, |
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| Nevada Total | 2016 | 2015 | 2016 | 2015 | ||||||||||
| All-in sustaining costs | $ | 41,162 | $ | 23,981 | $ | 101,469 | $ | 61,409 | ||||||
| Non-sustaining capital expenditures | 1,828 | 6,631 | 9,124 | 24,233 | ||||||||||
| All-in costs | 42,990 | 30,612 | 110,593 | 85,642 | ||||||||||
| Gold ounces sold (Nevada)(1) | 35,648 | 27,934 | 95,111 | 81,837 | ||||||||||
| All-in costs per gold ounce sold (Nevada) | $ | 1,206 | $ | 1,096 | 1,163 | 1,046 | ||||||||
| Total (with True North) | ||||||||||||||
| All-in costs (Nevada total) | 42,990 | 30,612 | 110,593 | 85,642 | ||||||||||
| Non-sustaining capital expenditures (True North) | 3,754 | – | 11,708 | – | ||||||||||
| All-in costs | 46,744 | 30,612 | 122,301 | 85,642 | ||||||||||
| Gold ounces sold(1) | 36,648 | 27,934 | 96,111 | 81,837 | ||||||||||
| All-in costs per gold ounce sold | $ | 1,275 | $ | 1,096 | $ | 1,272 | $ | 1,046 | ||||||
| (1) Includes ounces sold (if any) under the Gold Supply Agreement and ounces delivered under the Gold Purchase Agreement; see Notes 8 and 10. | ||||||||||||||
For a reconciliation of our sustaining and non-sustaining (growth) capital expenditures see the Investing Cash Flows part of the Financial Position, Liquidity, and Capital Resources section of the MD&A.
For More Information Contact:
John Seaberg
Senior Vice President, Investor Relations and Corporate Development
O: 775-284-5757
M: 303-668-7991
jseaberg@klondexmines.com